class: left, middle, my-title, title-slide .title[ # Inequality in Administrative Democracy ] .subtitle[ ## Methods and Evidence from Financial Rulemaking ] .author[ ### Daniel P. Carpenter, Angelo Dagonel, Devin Judge-Lord, Christopher T. Kenny, Brian Libgober, Steven Rashin, Jacob Waggoner, Susan Webb Yackee ] .date[ ### Paper, slides, & data: <a href="https://judgelord.github.io/research/finreg">judgelord.github.io/research/finreg</a> ] --- name: question background-color: #FFCFB3 ## Does wealth mean power in agency rulemaking? ??? This is the first paper to come out of a project where we have spent years collecting data and now get to write papers. Your feedback will be helpful in the directions we take this. We start with a simple question that has received a lot of attention in the legislative context. With 90% of US law now made in the executive branch. -- ## If so, why? - Are wealthy organizations structurally advantaged (i.e., do they always win)? -- - Or do they win *because* of their lobbying (i.e., because it is more sophisticated)? -- *not mutually exclusive. But _how much_ influence is due to lobbying? --- .pull-left[ <div class="figure" style="text-align: center"> <p class="caption"> </p><img src="data:image/png;base64,#figs/clip-structural.png" alt=" " width="100%" /></div> ] .pull-right[ <div class="figure" style="text-align: center"> <p class="caption"> </p><img src="data:image/png;base64,#figs/clip-lobbying.png" alt=" " width="100%" /><img src="data:image/png;base64,#figs/clip-lobbying-info.png" alt=" " width="100%" /></div> ] --- # PREVIEW 💰 `\(\rightsquigarrow\)` seat at the table - Wealthy organizations are more likely to comment - Among commenters, frequent commenters are wealthier -- Among commenters, 💰 `\(\rightsquigarrow\)` sophistication (e.g., lawyers) `\(\rightsquigarrow\)` lobbying success - Wealthy organizations submit more sophisticated comments -- - Agencies are more likely to adopt language from sophisticated comments -- - Much of the relationship between wealth and lobbying success* can be attributed to lobbying sophistication** *We observe only a small slice of influence that is most likely to be the result of specific sophisticated lobbying. **Much more to do on mediation ??? (ideas for better competing hypotheses?) e.g., the Inflation Reduction Act delegates authorities to 30+ agencies. Who do we expect to win and lose as fights move to agency policymaking? There is also a body of work demonstrating that businesses win more often than other types of organizations in rulemaking. We push this forward in two ways: First, we investigate the mechanism of business influence related to wealth and sophisticated lobbying Second, we assess inequalities *within* types of organizations Hogan and Burns (2019) find a total annual increase in Dodd-Frank-related compliance costs of $64.5 billion for banks with more than $10 billion in assets https://clsbluesky.law.columbia.edu/2022/06/29/rolling-back-dodd-frank-investors-and-banks-responses-to-financial-market-deregulation/ --- ## 📊 DATA - All 200+ Dodd-Frank Rulemakings (800+ policy documents) 2010-2018 - All ~300k comments on these rules ??? First, we collect all policy documents coming out of dodd-frank and all comments on those proposed rules. Then, we link comments to organizations with various measures of wealth. -- - Linked to 6k+ organizations (+ all ~500k similar orgs. that did not comment) <img src="data:image/png;base64,#figs/org_count_type-2.png" width="80%" style="display: block; margin: auto;" /> Number of Organizations by Type and Agency to which they Commented, Including the Consumer Financial Protection Bureau (CFPB), Commodity Futures Trading Commission (CFTC), Federal Reserve (FRS), National Credit Union Administration (NCUA), and Securities and Exchange Commission (SEC) --- ## 💰 `\(\rightsquigarrow\)` seat at the table <div class="figure" style="text-align: center"> <p class="caption">Financial Resources of Organizations that Did and Did Not Comment</p><img src="data:image/png;base64,#figs/nonprofit-density-1.png" alt="Financial Resources of Organizations that Did and Did Not Comment" width="49%" /></div> --- ## 💰 `\(\rightsquigarrow\)` seat at the table <div class="figure" style="text-align: center"> <p class="caption">Financial Resources of Organizations that Did and Did Not Comment</p><img src="data:image/png;base64,#figs/creditunion-density-1.png" alt="Financial Resources of Organizations that Did and Did Not Comment" width="49%" /></div> --- ## 💰 `\(\rightsquigarrow\)` seat at the table <div class="figure" style="text-align: center"> <p class="caption">Financial Resources of Organizations that Did and Did Not Comment</p><img src="data:image/png;base64,#figs/compustat-density-1.png" alt="Financial Resources of Organizations that Did and Did Not Comment" width="49%" /></div> --- ## 💰 `\(\rightsquigarrow\)` seat at the table <div class="figure" style="text-align: center"> <p class="caption">Financial Resources of Organizations that Did and Did Not Comment</p><img src="data:image/png;base64,#figs/FDIC-density-select-1.png" alt="Financial Resources of Organizations that Did and Did Not Comment" width="49%" /></div> --- ## 💰 `\(\rightsquigarrow\)` seat at the table, especially if profit-motivated <div class="figure" style="text-align: center"> <p class="caption">Predicted Probability of Participating in Dodd-Frank Rulemaking by Assets</p><img src="data:image/png;base64,#figs/mp-all-predict-quad-1.png" alt="Predicted Probability of Participating in Dodd-Frank Rulemaking by Assets" width="55%" /></div> --- background-image: url("data:image/png;base64,#figs/mp-all-table.png") background-position: center background-size: cover --- class: middle > ## [Comercial Banks]() were [four]() times more likely to comment on a Dodd-Frank rule than the average non-profit [Savings Association](), [six]() times more likely to comment than the average [Credit Union]() and [60]() times more likely to comment than the average [non-profit](). --- ## 💰 `\(\rightsquigarrow\)` seat at the table, especially if profit-motivated <div class="figure" style="text-align: center"> <p class="caption">Predicted Probability of Participating by Type of Bank</p><img src="data:image/png;base64,#figs/mp-FDIC2-predict-1.png" alt="Predicted Probability of Participating by Type of Bank" width="70%" /></div> --- background-image: url("data:image/png;base64,#figs/mp-FDIC2-table.png") background-position: center background-size: cover --- name: success background-color: #FFCFB3 class: middle center <style type="text/css"> #embeded_pdf { width: 100%; height: 100%; } </style> # LOBBYING SUCCESS <embed src="s73310-110.pdf" type="application/pdf" id="embeded_pdf"> ??? much harder to measure --- ## 💰 `\(\rightsquigarrow\)` lobbying success <div class="figure" style="text-align: center"> <p class="caption">Amount of Text Repeated in Final Rules by Commenter Resources</p><img src="data:image/png;base64,#figs/assets-efficacy-2.png" alt="Amount of Text Repeated in Final Rules by Commenter Resources" width="49%" /></div> ??? Finally, we test one mechanism by which wealth translates to power: as Wendy Wagner and others show, money to hire lawyers and experts. --- ## 💰 `\(\rightsquigarrow\)` lobbying success <div class="figure" style="text-align: center"> <p class="caption">Amount of Text Repeated in Final Rules by Commenter Resources</p><img src="data:image/png;base64,#figs/assets-efficacy-4.png" alt="Amount of Text Repeated in Final Rules by Commenter Resources" width="49%" /></div> --- ## 💰 `\(\rightsquigarrow\)` lobbying success <div class="figure" style="text-align: center"> <p class="caption">Amount of Text Repeated in Final Rules by Commenter Resources</p><img src="data:image/png;base64,#figs/assets-efficacy-6.png" alt="Amount of Text Repeated in Final Rules by Commenter Resources" width="49%" /></div> --- ## 💰 `\(\rightsquigarrow\)` lobbying success <div class="figure" style="text-align: center"> <p class="caption">Amount of Text Repeated in Final Rules by Commenter Resources</p><img src="data:image/png;base64,#figs/assets-efficacy-8.png" alt="Amount of Text Repeated in Final Rules by Commenter Resources" width="49%" /></div> --- ## 💰 `\(\rightsquigarrow\)` sophistication (e.g., lawyers) `\(\rightsquigarrow\)` lobbying success -- <div class="figure" style="text-align: center"> <p class="caption">Lobbying Success by Comment Sophistication</p><img src="data:image/png;base64,#figs/efficacyXsophistication-2.png" alt="Lobbying Success by Comment Sophistication" width="55%" /></div> ??? So we measure the sophistication of comments. The x-axis here is the number of words that appear in dictionaries of legal and banking terms. --- ## 💰 `\(\rightsquigarrow\)` sophistication (e.g., lawyers) `\(\rightsquigarrow\)` lobbying success -- <div class="figure" style="text-align: center"> <p class="caption">Lobbying Success by Comment Sophistication</p><img src="data:image/png;base64,#figs/mediation-4wayNo0-acme-1.png" alt="Lobbying Success by Comment Sophistication" width="100%" /></div> --- ## 💰 `\(\rightsquigarrow\)` sophistication (e.g., lawyers) `\(\rightsquigarrow\)` lobbying success <div class="figure" style="text-align: center"> <p class="caption">Lobbying Success by Comment Sophistication</p><img src="data:image/png;base64,#figs/mediation-4wayNo0-acme-3.png" alt="Lobbying Success by Comment Sophistication" width="100%" /></div> --- ## 💰 `\(\rightsquigarrow\)` PAC Donations `\(\nrightarrow\)` lobbying success <div class="figure" style="text-align: center"> <p class="caption">PAC Donations as a Mediator Between Wealth and Lobbying Success</p><img src="data:image/png;base64,#figs/mediation-marketcap-lobbying-1.png" alt="PAC Donations as a Mediator Between Wealth and Lobbying Success" width="60%" /></div> --- ## 💰 `\(\rightsquigarrow\)` sophistication (e.g., lawyers) `\(\rightsquigarrow\)` lobbying success <div class="figure" style="text-align: center"> <p class="caption">Technical Language as a Proposed Mediator Between Wealth and Lobbying Success</p><img src="data:image/png;base64,#figs/mediation-marketcap-terms-bluebook-1.png" alt="Technical Language as a Proposed Mediator Between Wealth and Lobbying Success" width="60%" /></div> --- ## Alternative explanations - sophistication is just stylistic emulation -- (but sophisticated comments get cites) -- - sophisticated comments are just more "correct" (?) -- ## Alternative interpretations: This is good, actually. Wealthier organizations "represent" more people (?) -- - employees? customers? shareholders? - volunteers? members vs. memberless? - regulated industry vs. consumers? - narrow private aims (US Chambers) vs. broad public aims (US PIRG)? -- Wealthy organizations better internalize collective benefits (but these are often private gains [Libgober 2020]) ??? Large/wealthy orgs may create collective benefits. Libgober 2020 finds these are often private gains, so let's just say that. I don't know how else to address this in an easy way. Even if big firms are creating policy benefits for all firms in the industry, the small ones are still being ignored more often, so I think our finding holds. I think hand-coding is the only way to know if the small firms are really winning just as much as the big ones from the agency adopting the big firm's suggestions. --- # 🙏 Feedback - Setup - Omitted variables - [Validation](https://judgelord.github.io/finreg/validation) - Do we need to model a selection process? ??? Selection model --- I am not convinced that Heckman is what we want or that there is really even a problem here. It seems that a selection model would be right if we were trying to make inferences about lobbying success about the whole population of orgs but only observing some (or if we were making inferences about all commenters from only some selected comments). However, I think we only want to make claims about lobbying success *among those who lobby* and we observe *all* of this population. Happy to discuss that further, but perhaps we just need to clarify that we are making inferences about different populations in different parts of the paper. Perhaps I'm wrong. -- # Next: - Compare lobbying on rules that regulate big banks vs. other rules - **Benchmarks** to compare lobbying inequality across Congress and the bureaucracy? - Assess other **mechanisms**? - legislator comments - Dimensions of variation across **venues** or policy **domains**? ??? --- # RECAP 💰 `\(\rightsquigarrow\)` seat at the table - Wealthy organizations are more likely to comment - Among commenters, frequent commenters are wealthier -- Among commenters, 💰 `\(\rightsquigarrow\)` sophistication (e.g., lawyers) `\(\rightsquigarrow\)` lobbying success - Wealthy organizations submit more sophisticated comments -- - Agencies are more likely to adopt language from sophisticated comments -- - Near all of the relationship between wealth and lobbying success* can be attributed to lobbying sophistication *We observe only a small slice of influence that is most likely to be the result of specific sophisticated lobbying --- exclude: true <table class="table table" style="width: auto !important; margin-left: auto; margin-right: auto; margin-left: auto; margin-right: auto;"> <caption>Log Odds of Commenting on Any Dodd-Frank Rule</caption> <thead> <tr> <th style="text-align:left;"> </th> <th style="text-align:center;"> Banks </th> <th style="text-align:center;"> Non-profits </th> <th style="text-align:center;"> Credit Unions </th> </tr> </thead> <tbody> <tr> <td style="text-align:left;"> (Intercept) </td> <td style="text-align:center;"> −1.694 </td> <td style="text-align:center;"> −5.754 </td> <td style="text-align:center;"> −2.864 </td> </tr> <tr> <td style="text-align:left;"> </td> <td style="text-align:center;"> (0.017) </td> <td style="text-align:center;"> (0.026) </td> <td style="text-align:center;"> (0.059) </td> </tr> <tr> <td style="text-align:left;"> Assets </td> <td style="text-align:center;"> 4.421 </td> <td style="text-align:center;"> 0.119 </td> <td style="text-align:center;"> 0.154 </td> </tr> <tr> <td style="text-align:left;box-shadow: 0px 1px"> </td> <td style="text-align:center;box-shadow: 0px 1px"> (1.455) </td> <td style="text-align:center;box-shadow: 0px 1px"> (0.024) </td> <td style="text-align:center;box-shadow: 0px 1px"> (0.046) </td> </tr> <tr> <td style="text-align:left;"> Num.Obs. </td> <td style="text-align:center;"> 25646 </td> <td style="text-align:center;"> 463617 </td> <td style="text-align:center;"> 5842 </td> </tr> <tr> <td style="text-align:left;"> AIC </td> <td style="text-align:center;"> 22184.0 </td> <td style="text-align:center;"> 19825.1 </td> <td style="text-align:center;"> 2512.9 </td> </tr> <tr> <td style="text-align:left;"> BIC </td> <td style="text-align:center;"> 22200.3 </td> <td style="text-align:center;"> 19847.2 </td> <td style="text-align:center;"> 2526.2 </td> </tr> <tr> <td style="text-align:left;"> Log.Lik. </td> <td style="text-align:center;"> −11089.986 </td> <td style="text-align:center;"> −9910.539 </td> <td style="text-align:center;"> −1254.445 </td> </tr> <tr> <td style="text-align:left;"> RMSE </td> <td style="text-align:center;"> 0.36 </td> <td style="text-align:center;"> 0.06 </td> <td style="text-align:center;"> 0.23 </td> </tr> </tbody> </table> --- exclude: true <table style="NAborder-bottom: 0; width: auto !important; margin-left: auto; margin-right: auto; margin-left: auto; margin-right: auto;" class="table table"> <caption>Log Odds of Commenting on Any Rule by Bank Type</caption> <thead> <tr> <th style="text-align:left;"> </th> <th style="text-align:center;">  (1) </th> <th style="text-align:center;">   (2) </th> </tr> </thead> <tbody> <tr> <td style="text-align:left;"> (Intercept) </td> <td style="text-align:center;"> −1.694 </td> <td style="text-align:center;"> −2.497 </td> </tr> <tr> <td style="text-align:left;"> </td> <td style="text-align:center;"> (0.017) </td> <td style="text-align:center;"> (0.061) </td> </tr> <tr> <td style="text-align:left;"> ASSETS_m </td> <td style="text-align:center;"> 0.004 </td> <td style="text-align:center;"> 0.006 </td> </tr> <tr> <td style="text-align:left;"> </td> <td style="text-align:center;"> (0.001) </td> <td style="text-align:center;"> (0.002) </td> </tr> <tr> <td style="text-align:left;"> Class N </td> <td style="text-align:center;"> </td> <td style="text-align:center;"> 0.292 </td> </tr> <tr> <td style="text-align:left;"> </td> <td style="text-align:center;"> </td> <td style="text-align:center;"> (0.074) </td> </tr> <tr> <td style="text-align:left;"> Class NM </td> <td style="text-align:center;"> </td> <td style="text-align:center;"> 1.081 </td> </tr> <tr> <td style="text-align:left;"> </td> <td style="text-align:center;"> </td> <td style="text-align:center;"> (0.066) </td> </tr> <tr> <td style="text-align:left;"> Class SB </td> <td style="text-align:center;"> </td> <td style="text-align:center;"> 0.968 </td> </tr> <tr> <td style="text-align:left;"> </td> <td style="text-align:center;"> </td> <td style="text-align:center;"> (0.109) </td> </tr> <tr> <td style="text-align:left;"> Class SM </td> <td style="text-align:center;"> </td> <td style="text-align:center;"> 1.217 </td> </tr> <tr> <td style="text-align:left;box-shadow: 0px 1px"> </td> <td style="text-align:center;box-shadow: 0px 1px"> </td> <td style="text-align:center;box-shadow: 0px 1px"> (0.077) </td> </tr> <tr> <td style="text-align:left;"> Num.Obs. </td> <td style="text-align:center;"> 25646 </td> <td style="text-align:center;"> 25646 </td> </tr> <tr> <td style="text-align:left;"> AIC </td> <td style="text-align:center;"> 22184.0 </td> <td style="text-align:center;"> 21590.5 </td> </tr> <tr> <td style="text-align:left;"> BIC </td> <td style="text-align:center;"> 22200.3 </td> <td style="text-align:center;"> 21639.4 </td> </tr> <tr> <td style="text-align:left;"> Log.Lik. </td> <td style="text-align:center;"> −11089.986 </td> <td style="text-align:center;"> −10789.229 </td> </tr> <tr> <td style="text-align:left;"> RMSE </td> <td style="text-align:center;"> 0.36 </td> <td style="text-align:center;"> 0.36 </td> </tr> </tbody> <tfoot><tr><td style="padding: 0; " colspan="100%">  Reference category = savings associations</td></tr></tfoot> </table> ??? TODO - richest nonprofits - 10k words adopted from chamber comment? On which rule?